1. MR KISHI welcomed MR MENZIES to Japan, and began the interview by saying that Australia and Japan were both countries in the Pacific region. Japan wanted close relations with the British Commonwealth, especially Australia. He then referred to the way in which the two countries had solved outstanding problems between them and referred particularly to war criminals (their return from Manus [Island] and the release of most of them); the agreement on a war cemetery in Yokohama; the agreement on civil aviation; the agreement on BCOF  surplus stores; and the admission of Japanese war brides to Australia. He said there were still two outstanding problems: pearling and trade.
2. KISHI then said that Japan would continue to work for peace. He said Japan had become a member of international organizations, and he referred particularly to the Colombo Plan and to the United Nations. He said that Australia had played 'a big part' in getting Japan admitted to the United Nations, and Japan appreciated this.
3. KISHI then returned to the question of war criminals, and said that the Japanese Government had been given to understand that the last of the war criminals sentenced by Australian Courts would be released within the next three months. He wished to express 'the great thanks' of the Japanese Government for this (KISHI appeared to be speaking with some emotion on this point).
4. KISHI then referred to the question of pearling, and said that it was important that a quick solution be brought forward to pave the way to better relations. We should 'stand on a higher standpoint'. Leaving aside for the time being past negotiations and standpoints, but with each side reserving its legal rights and without prejudice to its position, we should seek a quick solution in a practical way. KISHI said that he understood that MR MENZIES had told MR SUZUKI last year it would be unfortunate if this matter was put before the International Court; and that, if we could arrange some long-term treaty, this unfortunate situation could be averted. KISHI said that the way to resolve this was:
a) both our countries should reserve their legal rights and try to solve the question in a practical way; and b) they should forma joint committee, with equal membership from Australia and Japan, to regulate in a concrete way anything affecting the pearling industry.
KISHI said that he would like these two points to be examined. If they could not be realized, Japan would like to know as soon as possible so that, in that event, the case could go to the International Court and our two countries could await its adjudication. KISHI then handed Mr Menzies a Note Verbale on pearling.
5. KISHI then referred to the negotiations now going on in Canberra on trade between Australia and Japan. He said the principal problem had seemed to be wheat. There was a lot of opposition in Japan regarding wheat, but Japan had thought they should aim at an economic agreement with Australia, and 'I have personally intervened in this problem and tried to have the pros and cons settled inside the Government. Frankly speaking, I should like to express surprise that the Australian representative at the talks has referred to the matter of wool.' KISHI said that Australia had asked for commitments that, during the period of the agreement, Japan should not impose a tax on wool. Matters affecting barley and sugar had also been raised. KISHI said it seemed appropriate to have this question of wool negotiated after the trade agreement, as a matter of tariff negotiations. If the trade negotiations drag on too long, it might have an adverse effect on our trade relations and possibly our general relations too. KISHI said he would appreciate it if MR MENZIES could look at the matter and try to simplify the negotiations.
6. KISHI then went on: 'I believe that in Australia there are some arguments that the tariff on wool could be considered in relation to the withdrawal of the Australian reservation in Article 35 of GATT. If that is so, we would like to have it studied.'
7. KISHI continued: 'I have heard that you are apprehensive that perhaps after the agreement Japanese goods might flood the Australian market. But I do not think this is so. Our motto in export policy is ordinary marketing. If there is any case of Japanese goods flooding your market, we shall at once caution the exporter and, as a Government, we will do all we can.'
8. KISHI said that hitherto Japanese industry had mainly centred on light industry, but it was now ready to export capital goods.
Japan considered that there was plenty of room to expand exports of capital goods to Australia. 'I would appreciate it if you could consider importing our capital goods.'
9. KISHI said that Japan wished the negotiations on trade to take place in Canberra, but for the signature to take place in Tokyo.
They would appreciate it if Mr McEwen could come to Tokyo to sign the agreement.
10. KISHI then referred to cultural exchanges between Japan and Australia. Within the past two years Japan and Australian cultural exchanges had developed, and he was quite satisfied with it. But even if no cultural agreement could be reached, he felt that we could further expand cultural relations between our two countries.
For its part, Japan should like to have an exhibition in Australia of ancient Japanese (which they had hoped to arrange last year but had been unable to accomplish). We could think of exchanging students and perhaps professors and establish a Japanese- Australian Cultural Society. KISHI said he would appreciate it if Australia could co-operate in that way.
11. KISHI also referred to an exchange of visits of Parliamentary delegations. He understood that MR MENZIES had already given some thought to this. KISHI said he thought that this would be very significant in promoting friendship. KISHI said that the Japanese Government would have to consult the Diet, but would like to take concrete steps to instigate this exchange of visits.
12. KISHI also extended an invitation for an Australian industrial mission to visit Japan. He linked this to the expansion of Japanese capital exports. He invited a mission of five or six people to visit Japan this year.
13. KISHI lastly referred to the establishment of a direct wireless circuit between Australia and Japan. Telegraphic and telephone traffic between the two countries had increased so much that we could have a direct circuit established. He appreciated that there might be complications inside the Commonwealth, but he felt the direct circuit would be helpful in our relationships, including economic relationships.
14. When KISHI finished, MR MENZIES, after expressing thanks for the welcome he had received, said: 'I was very touched to be greeted at the aerodrome by so many distinguished men. I am looking forward to talks here. I think perhaps I should say just a little about the attitude of Australia to Australian-Japanese relations since the war. My own Government came into office at the end of 1949, and, at that time, it is necessary to recall, there was a very strong and frequently bitter feeling in Australia against your country. My own attitude on that, and the attitude of my colleagues, I can put quite shortly: it was a bad thing to perpetuate attitudes of that sort, and a good thing to promote better relationships. In particular, we felt that Japan must politically be brought back into the full community of nations, and for that reason we have been one of the great advocates of Japan's admission to the United Nations. We felt that, because we regard this as a very great country and a proud country which should be existing in terms of friendship with countries that have the same feelings. Anyhow, it is part of the tradition in British countries that when you have had a fight you shake hands and have friendly relations. And that was part of our general approach.
15. 'Our other point of view was on the economic side. We believed, and still believe, that the Japanese economy should be strong. You have a big population and have been a great trading nation and will undoubtedly be one again. It is of great importance that you should not be hindered by unnecessary policies on the part of the rest of us. We had ideas of that kind in our mind when we actively sponsored Japan's admission to the Colombo Plan, because we felt it was related to Japan's economic development.
16. 'We believe that particular causes of irritation should be removed gradually-not all at once, because public opinion has always to be considered by politicians, but steadily. The matters you have referred to as cleared up have been in our minds too.
When you consider these past seven years, what has been achieved in those seven years has been remarkably good.
17. 'I would like to add personally that the development of these relations has been remarkably developed by our diplomats at each end. In Canberra we have had MR SUZUKI. No one could have done more and few could have done as much.
18. 'One thing I would like to repeat and emphasize: you have your political problems, we have ours. We have ours complicated by a Federal Government and six State Governments who possess extensive powers. That means there are some problems we can deal with for ourselves, subject to public opinion and elections, but there are others we can handle only with substantial agreement from the State Governments and Parliaments. I will come back to that because it has a bearing on one or two problems mentioned by you.
19. 'But before doing that, I should like to refer to one or two remarks at the end of what you had to say, while they are still fresh in my mind. I am very much struck by Your Excellency's ideas on cultural contact in the broadest sense. I firmly believe that more things are settled by human contact than people sometimes realize. When I return to Australia I shall immediately look into the suggestions you have made about an exhibition of art, and I will talk to our educational authorities about the exchanges you have mentioned of teachers and professors.
20. 'I can also say I will be prepared to send a delegation of Members of Parliament to Tokyo, with the thought that you may wish to send a delegation to us. The delegation need not be large- enough to give a fair representation to the different interests, such as Government and Opposition. The details of that could be taken up immediately through diplomatic channels and the appropriate Parliamentary officers.'
21. In referring to the trade discussions, MR MENZIES said: 'It is very difficult and perhaps undesirable for me to go into any detail, because I am not personally taking part. The negotiations are going on in Canberra just now, and I do not want to say anything to interfere with the success of those talks. We have gone into these negotiations because we recognize the problems you face in trade with Australia-you being big importers from us, and we being smaller importers from you. But you will no doubt appreciate that there are a lot of difficulties that will take a lot of discussion to solve. I hope they will be solved. Let me give an example. Our greatest export to you is wool. But coming into Japan, wool does not compete with something here-it is a raw material for industry-whereas, in the past, Japanese exports to Australia are mostly finished goods which compete with Australian industry. But these are commonplaces, well understood on both sides. Our negotiators are looking at this. We have a system of import control to protect our balance of payments. We cannot discriminate between one country and another-at least non-dollar countries-without falling foul of GATT. In relaxing our import controls we have to do it evenly.
22. 'But I think it is quite true to say that we do understand your problem. We know perfectly well that if you take the world picture as a whole, you will not be able to buy if you cannot sell.
23. 'The point you have made about a possible extension of exports of machinery and mechanical equipment is one I would be glad to look at, though I would like to make a comment right away. We, as a Government, are not importers. We do not buy any considerable amount. State Governments buy more, contractors and private individuals buy a lot more, but the Commonwealth Government buys little. Therefore, private industry has to be brought into the picture. That is why I am attracted by your suggestion of an industrial mission, and I suggest that might be reciprocated in the industrial field, if that is where you see possibilities of expansion. Let me give you an example. The French Government used to be worried about the lack of balance of its trade with Australia. I used to say to the French Ambassador "We can't buy more perfumes and things like that. What else do you have that Australia needs?" He would say "plant and industrial equipment". I told him that the big French industrial firms should send out representatives to Australia to see what we needed that France could supply. They did so, and secured a big contract in the Snowy Mountains.
24. 'Otherwise I have noted what you have said. I will be home in a couple of weeks and I will discuss it all with Mr McEwen.'